South Korea fines Qualcomm for unfair trade practices

Qualcomm has been fined more than $200 million by anti-trust regulators in South Korea for unfair trade practices over discounts and rebates it provides to customers who buy its cell phone chips.

The fine, the largest ever by the Korea Fair Trade Commission, stems from a three-year investigation of Qualcomm's business practices in that country, where its major customers include phone makers Samsung and LG.

Qualcomm said in a statement Thursday that “firmly disagrees” with the commission's findings and would appeal the ruling and fine in Korean courts. The San Diego company said the ruling is based on legal and factual flaws and that the fine is excessive.

“The decision appears to have ignored or discounted evidence presented by Qualcomm and its Korean customers that demonstrates that Qualcomm's business practices in Korea are lawful, highly beneficial to its customers and the Korean wireless industry, and pro-competitive,” said Donald Rosenberg, Qualcomm's executive vice president and general counsel.

The commission alleged that Qualcomm, which licenses its technology to mobile phone makers and other chip makers, charged higher royalties for companies that used a competitors chipsets. It ordered the company to stop these pracctices.

Tavis McCourt, an analyst with Morgan Keegan, said the Korea commission's decision against Qualcomm is relatively minor, despite the large fine.

The commission investigated three potential violations and found that Qualcomm did nothing wrong in two of the three.

McCourt said the commission ruled against Qualcomm's business practices in its CDMA chipset business, where there is little viable competition. The company holds 99.4 percent market share in the CDMA chipsets in Korea.

So the company is not in danger of losing market share to a competitor based on the commission's ruling, McCourt said.

“The decision by the Korea Fair Trade Commission today seems much more benign than (Qualcomm) seemed to be indicating” in its fiscal third quarter earnings release on Wednesday, when it said the fine could be material to its results.

Qualcomm competitors Texas Instruments and Broadcom, along with South Korean companies Nextreaming Corp. and Thin Multimedia, filed complaints about its business practices. Broadcom later withdrew from the complaint as part of a patent settlement with Qualcomm.